Don't subestimate brazilian capacity. We had 25 years "starving" with inflation, political instability e extreme poverty. Depending on young generation, the country might goes even beyond. It's easier to compare Brazil with all latin america than only with Mexico.

I would like to point out that using nominal dollar amounts to compare GDPs is plain WRONG; exchange rates bring introduce huge distortions to the comparison. Rather, purchasing power parity has to be used.
Take a look at this graph comparing Mexico´s and Brazil´s GDP in nominal dollars:http://www.wolframalpha.com/input/?i=nominal+gdp+mexico+brazil

You have a great point, Brazil will keep on being bigger, but Mexico will keep on being richer.
But I must point out that in the last decade, Brazil did indeed grow more than Mexico on real terms, not only on nominal terms. On real terms Brazil grew an average 3.7% a year, while Mexico grew 2.1% in the 2000~2010 period.

Brazil has its own pecularities. Trying to compare Brazil to any other economy in the world is a waste of time. It's political, economical, cultural and educational backgrounds are far too distinct to be easily understood by any alien.

Mexico indeed was Latin America's superpower 20 odd years ago, in the shadows of United States economy. It's problem is, that it's still well within the cave. The culprit of Mexico's stagnation was United States recession and current unemployment rates, there are 12mi people unemployed (BLS). You must create income in order to create expenses and no company in the US is going to outsource to Mexico right now (at least they shouldn't).

Brazil's grouth rate might have stepped down in 2012, but one must understand this is a result of investments being made everywhere. The implementation of digital invoices, that are issued only after being validated by the government, ties all loose ends discouraging corruption and on the other end, increases tax collection to record breaking highs making cash available for public investments. Private sector is booming with construction, manufacturing, agriculture and services all expanding their business. And we are still two years from FIFA's World Cup and four years from the Olympics in Rio.

Not to mention that Brazil still is and for a long time will remain a major stakeholder on the commodities market.

I believe that there are still a couple of years of slow grouth, but after the economy re-settles, no other country in America (yes, I meant it without Latin) will be able to step on Brazil. We might be a few laps behind in the race, but certainly we have and will have the fastest lap, for a long time.

Well there must be something seriously wrong with the GDP per capita adjusted by PPP that you're presenting. Just tanke into account that Mexico's population growth has been about 2% during the period which is about the same growth of GDP in real terms, so the numbers just don't add up to back the growth in GDP per capita that you're presenting.

I don't thnk we are really competitors, other than for the psychological prize of LatAm's "who has it bigger" inveted by Financial media. Our economical structures, areas of competitive advantage and natural markets are very dfferent. Growth in Mexico and Brazil is far from being a zero-sum game.

Look, I'm the first to say that Brazil has many problems and must do a LOT of reforms, most of them supply side. However to assume that Brazil will basically stop growing in the next years and that Mexico will suddenly start to grow way faster than it did previously is kind of heroic.

I mean, If Brazil suddenly start to grow 10% a year, and the United States grow at 1% per year, we would catch up with the US fast. But that is not going to happen.

No. The assumptions are already happening. This year Mexico will growth twice as Brazil's for second year in a row. Also, the mexican peo is undervalued as the real is overvalued, so things tending to the equlibium, mexican numbers will get sronger as the peso moves closer to the market exchange rate. Also, Mexico has a huge untapped potential for consumer credit, whereas Brazil has already played that card and consumers are aready overleveraged. Upcoming structural reforms in Energy and Fiscal will also provide a boost (labor is already done and the new govt hasn´t even ben sworn).

What does Brazill needs in order to grow at 4-5%? A chinese double digit growth? If o, thing are going to get worse, I mean, China is still growing at 8% and that was enough to create a serious slowdown in Brazil. Mexico, on the other side, needs a stable 2% growth in the US to grow at 4-5%, which I believe is more plausibl in the mediun run than a high growth Eurpe or China going back to double digits.

Finally, let's no forget that Mexico's population in 60% of Brazil's, which means that we don't really need to cath uo in total GDP to remain a richer country.

Indeed this scenario has happened for 2 years now. What I believe is a very strong assumption is that this will continue to happen for 10 more years.

I don't really care whether Brazil or Mexico is richer, I care if Brrazil will grow, since I am brazilian. I suspect you care more about how rich Mexico is going to be in 10 years than how that will compare with Brazil. I agree that GDP per capta is what really matters.

However I don't quite share your thoughts about Brazil. While we have become rather dependent is commodities exports, we still have a big industrial base. What needs to be done is to open trade barries for capital goods and imports, make the government less meddling on business affairs, lower taxes, and labour reforms. Basically supply side reforms. And while consumer are already a bit indebited (not by that much mind you, mortgages are still at 5% of GDP) companies have just begun to issue long term debt, wich makes investing in capital goods easier.

All in all I believe that both Mexico and Brazil can grow at fast rates, around 4%, wich means Mexico will remais richer and Brazil bigger. What neither of us can deny is that much needs to be done in our contries if that is to be the case.

73% of Mexico's exports go to the US. 17% of Brazil's exports go to China (Brazil's largest export partner as a region is the EU, at 20-25%). I think that is not a little difference. Brazil depends on China, but is definitely not "too dependent" on China.

Since the Chinese slow down in 2010 Brazil is performing very poorly in terms of economic growth. The real is not doing very good without China's performance neither, right?
The real question is about the change in Brazil´s economic performance and the improvement in Mexican economy.

That alone doesn't make a good argument. Brazil grew 7.5% in 2010 and slipped only -0.3% in 2009, so its "rebound effect" was very little compared to countries like Mexico, which reduced its GDP by 7% in 2009. Even before nowadays' problems, I already figured out Brazil would probably grow less than other markets like Mexico or Chile, which were much more affected by the 2008 Crisis.

Besides, it was not only China's slowdown that worsened Brazil's performance. Of course it influenced, Brazil does trade a lot with China, and this is a globalized world. However, what made Brazil grow only 2.7% was: China slowdown, worsening of the situation in the EU (Brazil's largest trade partner, I reinforce), growth of inflation which led to Brazil initially increasing interest rates and leveling previous stimuluses to the economy, appreciation of the Real due to quantiative easing which led to the lesser competitiveness of Brazil's industry, the "post-boom" relaxation after the explosive growth of credit in 2004-2010 (credit now keeps going at 10% per year or so, but before it grew even 20%) etc. Brazil's economic situation is much more complex than a simple "China dependence". Actually, it is probable that the uncertainty and recession in the UE is just as important, but most important of all, Brazil being an internal market oriented economy, was the growth of inflation, the stricter fiscal policy in 2011 and the lesser growth of trade and services after the astounding performance of 2010.

Outdated source without the same credibility of the data provided by the World Bank or the IMF. Notice the last dara are 2008 ESTIMATES, that is, the most recent data they have are mere estimates made earlier than the Great Recession. It's now useless. Besides, what does the comparison the link shows has to do with Brazil's recent economic performance? You certainly know there is more in this world to be discussed than silly comparisons between Brazil and Mexico, don't you? I think you read my comment well enough to understand I'm talking about the Brazilian economy. I'm not caring for what Mexico is or is not.

The point is that Mexico´s trade accounts as much as 3% with Latin America as Mexico-also economically as geographically- is in North America. So it is not about how we see "ourselves" but rather where we are in economic terms.

As an American, let me clear things for you: Mexico is culturally part of Latin America, and geographically part of central or north America, depending on the source. I, personally consider it Central America, as do most of North Americans. I've never heard anyone call a Mexican "North American", but I know that Mexicans are the great majority of the "Latinos" in the US. Lol, please, Mexico to look down on Brazil as a "developing Latin country" is hilarious! Mexico is also a developing Latin country, even though Mexico is in the OECD, it's not developed, much less rich, its GDP per capita is a little higher than Brazil's, but far away from rich country level. You are embarrassing the Mexican people with your delusions of grandeur. It's like Spain looking down on Portugal for being the P of the PIGS, while ignoring that Spain is the S in there.

Mexico is the only country in the OECD that performs horribly on the PISA tests, have headless bodies hanging from bridges and bodies of top-wanted-list criminals stolen from the authorities under their noses. I believe not even Brazil or any South American country has the last two, maybe only others in Central America have. Definetely, Mexico is Central America.

Seriously, guys: when you say "Latin America", you are dividing the whole continent into parts according to the origin of the language spoken: Anglo-Saxon America (US, Canada) and Latin America (obs: of course French is spoken in Canada, but this division is based on the language spoken by the majority of the population). When you use the expression "North America", you're dividing the continent into three parts: "North America", "Central America" and "South America". Therefore, Mexico is simultaneously a Latin American country and a North American country - it all depends on which classification you use.

Brazil has a huge land huge forest huge rivers resources and so far I have not seen the economy of Brazil take a hit lowering the life style of the population. They seem to be satisfied. The word BRIC came from the economy of Brazil , Russia, India and China but the WMD and from 2007 all have become very careful in their own statistics and roadmaps as many put it that it is very difficult to say any will have more chance to grow. Static it may be but growth I doubt I thank you Firozali A.Mulla We are all bound together in the cash liquidly if one has has problem this is passed on to the them, we will carry on living with care and planned manner never seen before

Brazil is a commodity export economy with an uncompetitive large industry. Mexico is an OECD member and it is located in North America whereas Brazil is a South America (Latin American) economy. Mexico is less dependent from the USA economy from 95% in 1994 to 86% in 2011 and the USA economy is much more dependent on Mexico and lesser in China. Mexico has overtaken Canada as the second trade partner of the USA. Brazil -"the biggest economy" in Latin America- is not the largest investor in LatinAmerica. Th largest investor in LatinAmerica is...Mexico even though its trade with LatinAmerica accounts for less than 3% with the region. Brazil will bust pretty soon just to wipe off all the great gains of the China driven raw materials export boom to come back to business as usual with no reforms dependent on commodity prices and currency overvaluation to boost consumption. Great devaluation round the corner to reduce the 40% overvaluation and start growing again without the massive amount of commodity trade capital inflows. It will just wipe off all the 12 year growth and poverty reduction gains in a second.

Wrong again... Mexico is not "geographically" in Latin America... nor is any other country, for that matter, since Latin America is a cultural entity, rather than a geographical one. Do YOU get that?

And who told you that trade makes a country be part of this or that area (economically or whatever)? Mexico's GDP per capita, HDI, Gini coefficient and other -more important- economic indicators, are much closer to Latin American standards than they are to Canada and the U.S's, so, "economically", Mexico is still where it belongs: LatAm.

This is called delusion of grandeur. Somehow this guy thinks Mexico is a rich developed North American country, like the US or Canada. Probably he must believe Mexican are tanned Anglo Saxons. It doesn't belong to any of the categories above. As a real North American, I can tell. If I were Mexican, I'd be very embarassed for this guy, much more than looking down on Brazil and Latin America, he's looking down on his own country.

Well, I am a Mexican, and I can tell you: we do not feel embarrassed at all about this guy; he just got his facts wrong. But I can tell you one thing where you are wrong too: Mexico IS part of North America, both geographically and politically.

We are also culturally part of Latin America, but that is not something to be ashamed of or hide, like both you and George9982 seem to think. Being from this region or another does not make us any better or worse; nor does it have an influence on our economic prospects either.

As for the tanned-Anglo-Saxons part, he did not bring race into the discussion; you did, you showed your own racist and classist attitude towards Mexicans who, by the way, do not need to be WASP's to be "real North Americans".

Bullshit, it depends on the division: if you divide the Americas between north and south, then Mexico, as well as Guatemala, Costa Rica, the Caribean, etc are all north America. But if you divide the Americas between North, Central and South, then Mexico is geographically CENTRAL America. In the US only two countries belong to North America, also in China, Japan and Korea, Mexico belong to Central America. Anyways, you can claim whatever you want, my point is that it's ridiculous to look down on Brazil as a "developing Latin country", like the guy above did, just because Mexico is, according to some sources, geographically North American and belongs to the OECD ( and frankly, I don't know WHY it does). Mexico may be a couple of thousands dollars ahead of Brazil, but it's the same developing Latin country. Actually in some aspects it is worse: I never heard of headless corpses popping up in all sorts of public spaces or a messy presidential election in Brazil.
Anyways, for a guy to claim that Mexico is not Latin America, that it is developed just because it ( erroneously) belong to the OECD, it takes a lot of delusion or a lot of ignorance, you choose.

As for my classist attitude: I was trying to give the guy above a run for his presumption. And by the way, the OECD lost its meaning when they let Mexico in. And it's nothing against Latin or other races or cultures: South Korea, Taiwan, Singapore and even Chile deserved their place in the group. Uruguay also does. Mexico doesn't. Please don't ask me why.

Well, first, get a book on Geology and look up a funny concept called "Tectonic Plate", and you will see why Mexico is part of North America Geographically. Then look up "NAFTA", and you will see why it is so Politically. Kindly do this before coming and calling something "bullshit" just because it does not fit your own world view.

Second, you said it is "...ridiculous to look down on Brazil as a "developing Latin country"... well, I had made that point earlier, to the same guy, so you have no business pressing it onto me any further.

As for Mexico belonging to the OECD... well, if you do not like it, you will have to put up with it and move on, since it is not up to you.

Oh, and Mexico and Brazil are not "the same developing Latin country", they are very different -both beautiful- countries... what nonsense!

My Gosh! Is this all a desire to belong to the same group as the US and Canada and not the same group as your blood brothers down South? As for the OECD, I don't care, as I've said: it's lost its meaning when it let Mexico in, might as well let China, India and Brazil in, too, at least they're more relevant.

As I said before, it is not up to you to decide who belongs to the OECD or not... and I really, REALLY, could not care less who YOU would include in your own imaginary club of rich kids (nor does the OECD).

And as for my "desire" to belong to the same group as the US and Canada... even if I wished, I could not move a landmass that big out of your vicinity. But it is indeed funny how the same desire to detach the US and Canada from any connection to Mexico can be found in yourself.

As for our blood brothers down South... you REALLY need to learn how to read pal: this very discussion started because I was defending the idea that Mexico too belongs in Latin America in the first place.

Oh, but I get it: you just want to hate Mexico... well, I do not have any business talking to you, after all, my country does not need me to defend it from all this hot air. Enjoy it yourself!

In the last few weeks, I have read at least 6 or 7 news about Brazil's growth compared to Mexico's, and ALL of them are based exclusively on Nomura's forecasts and opinions. Come on, what is the big interest in publishing dozens and dozens of conclusive news based on the performance of two countries in only two years and on the assumptions of one report made by Nomura? I am starting to believe there must be some hidden interest or at least wishful thinking at promoting one economic model over the other. That said, I wish Mexico the best, it certainly deserves to be a regional power and to get rid of the excessive dependence on the US, even though that would require its goverment to start new policies to diversify its trade and political relations. What I think is unacceptable to a rational analysis on this subject is that people keep this nonsense "If Brazil keeps growing like in 2012, and if Mexico keeps growing more, then Mexico may catch up with Brazil in 2022 or so". Besides that being an obvious conclusion, it is entirely based on two hypotheses: that Brazil won't recover, and that Mexico will necessarily grow much more than Brazil. There is nothing too evident for us all to show that will happen.

Totally agree with this. Specially when you take into account that TFP growth is esential for economic growth. The change in TFP growth that Nomura predicts is nothing more than a good laugh, how are we supposed to change from a 0.3% growth over the last 20 years to a 1.5% growth rate? There's nothing in Nomura's analysis to support that assumption which is crucial for their conclusion. They base their conclusion only on what has happened in other countries without taking into account that Mexico's TFP has remained stagnat for over 30 years (since the debt crisis of the 80's).
Mexico's growth has been mainly derived from adding the use of more factors in the economy (more labor+capital), a clear evidence of that is that GDP per capita has remained stagnant over the last 30 years. Any analysis which can't give a good reason on why will there be a change in the TFP trend is nothing other than bull$%/#. The last 2-3 years Mexico's growth has been only a rebound of the 2008 crisis (Mexico's economy declined almost 7% in real terms during 2009, the crisis hit us as hard as the Tequila crisis, which seems to indicate that there was something wrong in the policy response in Mexico...).

So instead of Mexico's being an example of a "succesful economy" it's an example of what happens when you implement liberal reforms without developing the institutions that are needed to support those reforms. It's also clear that the orthodox policy response ("fiscal responsability & defending the value of your currency) was clearly misguided for the 2008 crisis.

I you want serious economic analysis, you need to read peer-reviewed economics journals.
Normal newspapers and magazines usually don´t know what they are talking about, and will simply rehash what others are saying, and spin it ad nauseam. The Nomura report will be quoted for 10 years, just as the BRIC report :)
There´s no hidden interest; journalists need to fill pages, that´s all. It´s not like they are going to do primary research to do that.

What to think about a second Greece! In Brazil the people got their pension after 30 years of work! I have a friend who is 72 and gets 30 salary minimum (today U$ 310 next January U$ 340)a month or 18.000 and this is 13 month and one more month vacation salary so this is R$ 252.000 or U$ 126.000 which he probably never payed on taxes in his 30 working years. Who is paying this? And he is not the only one! A can of beer 33 cl is about 1 U$!!! Rice rose a 2 months time about 30%. Gas for cooking about 20% in less than one month! Officially we have an inflationrate from about 6% a year??? The new FIAT UNO cost here at least U$ 15.000 an imported KIA PICANTO U$ 20.000 two times more than in EUROPE!

Brazil is enormously dependent on commodity exports - and commodities will probably crash if China's growth slowdown turns into Chinese recession (given China's reliance on investment, that's likely). Furthermore, a large part of Brazil's recent growth has been due to a massive debt expansion - consumer credit has exploded, and the government has been running deficits despite massive temporary windfalls from commodity exports.

Brazil - to a still greater extent than Greece - is not well integrated in the global economy, with only a trivial proportion of GDP coming from manufactured & service exports. Just like Greece then (perhaps to a greater extent), it will take an enormous drop in incomes before exports are able to grow enough (and imports to fall enough) to pick up the slack from collapsed domestic demand.

On the bright side, Brazil has been improving on all the fundamentals - with investment in education, alleviation of extreme poverty, formalisation of the workforce, extending routine access to business & consumer finance, investment in quality infrastructure (still more to be done - bulldoze the NIMBYs and build more hydroelectric dams), etc.

But, alongside this, Brazil absolutely must integrate more fully in the world economy, and diversify its export base. If Brazilian manufacturers and service providers are to be world beaters, they have to have access to cheap (i.e. without import tariffs or restrictions) German machine tools, Japanese batteries, Taiwanese integrated circuits, American marketing services, Chinese telecommunications equipment, South Korean fibre optics, Dutch grid equipment, Scania trucks, etc. And, obviously, they also need unfettered access to developed world markets.

The liberal narrative isn't universally correct - it is essential to reduce inequality and invest in education, to develop a large domestic consumer market and skilled workforce. But on trade, the liberals are right (as East Asian tiger countries surely demonstrate; or Turkey & Egypt, which have seen routine 5%+ growth rates thanks to increasing trade integration with Europe).

Very true. Everything in Brazil is more expensive than in therest of trhe world to some extent due to taxes more taxes that most be levied to pay for the retired government employees with full salaries and a free Federal University. I am Brazilian but I believe that Brazil will be forever the "country of the future", a future that will never arrive.

First the press love to compare the 7.5% with the current situation. At the time the press attacked the 7.5% as purely based on stimulus from a massive government program to offset the 2008 near collapse of the global economy. Now Brasil having a tough time during a long term global slump, 15 years ago the current global situation would have had Brasil begging the IMF for a bailout. So a little context please!

Secondly the persistent eulogising of the FHC administration show a very short or selective memory. Yes, some good reforms took place in the first term, however most of the hard work was done during Itamar Franco's term, when FHC was finance minister. A large piece of the important reform of pensions to stabilise long term spending was done during Lula's first term and the end result of that being passed is going through the courts at the moment, the Mensalão.

Welfare spending? Is this a joke? The Bolsa Familia cost around 0.5% of GDP...

The comparison between the two countries is about as useful as comparing the "BRICS" to one another. i.e. not.

Why do the press always have to find an "angle" even when there isn't one.

Look, Brazil needs to export more, Mexico needs to sell more to its own people. That's it. No country is a model of what to do to get wealthy at that matter. Mexico exports more not because it is tremendously richer and more productive, but because it is an export-oriented economy. Brazil exports about 300 billion dollars with a larger economy because it is clearly an internal market-oriented economy, exporting only 12% of its GDP (all that rubbish about Brazil depending only on the commodities exports nonwithstanding).

But well, now to the point, this post is total crap. Mexico has had pathetic TFP growth durimg the last 20 years, an average of 0.2 during the 92-2001 and 0.1 during the "good years" of 2002-2010. Then suddenly this so called analyst, says that we will magically jump to a TFP growth of 1.5 on average on the next decade??? I guess the dude is high on something because that number seems like total whishful thinking. Brazil is going to suffer a lot of pain very soon, but the mexican economy is one of the world's worst performers (welcome to our liberal dream!!)- just check the change in the GDP per capita during the last 20 years vis a vis the rest of the world- and the difference between Mexico and Brazil is just too big to be closed with a crisis in Brazil, which probably won't be too bad anyway.

Besides, as Mexico's growth engine is, literally, the US, I don't see how are we going to grow 5% a year as this analyst forecast, since the US will have sluggish growth for a while. The last cupple of years Mexico's growth has been just a rebound (we were one of the countries that were hit hardest by the 2008 crisis). In short, try to check your facts first before posting crap like this, you give The Economist a bad name.

And no, we are not going to grow ath 5%, and no, Mexico´s GDP will not be higher than Brazil by 2022. But the GDP per capita PPP adjusted is already significantly higher, and I predict that the gap will continue to widen in this century.

Oh I didn't tought you used the same cheap data twice, anyway. Here's the response:

"Well there must be something seriously wrong with the GDP per capita adjusted by PPP that you're presenting. Just tanke into account that Mexico's population growth has been about 2% during the period which is about the same growth of GDP in real terms, so the numbers just don't add up to back the growth in GDP per capita that you're presenting.

Also, those numbers just don't match the data published by the world bank or the OECD. http://databank.worldbank.org/ddp/home.do"

Oh I didn't tought you used the same cheap data twice, anyway. Here's the response:

"Well there must be something seriously wrong with the GDP per capita adjusted by PPP that you're presenting. Just tanke into account that Mexico's population growth has been about 2% during the period which is about the same growth of GDP in real terms, so the numbers just don't add up to back the growth in GDP per capita that you're presenting.

Also, those numbers just don't match the data published by the world bank or the OECD. http://databank.worldbank.org/ddp/home.do"

I am mexican too and you do remind me that we will always be ahead in the number o pessimistic self-loathers. A slugish but steady growth 0f 2% in the US is enogh for Mexico to grow at 4-5%, and that is more likely than China going back to the double digits (the Chinese themselves agree that they will be around 6-7% for the rest of the decade)or Europe picking up gowth that Brazil needs to achieve high growth.

The US had steady 2% growth during the last 2 decades, Mexico's failed to ahieve the 5% steady growth you mention. I am not a "mexican self-loather", I am just pointing that the economic reforms in the last 30 years in Mexico have achived very little in terms of promoting growth (I agree that they have brought macroeconomic stability, but macroeconomic stability doesn't bring economic grwth by itself).

If that hurts your national pride, that shouldn't take you to play blind and act as if nothing was wrong with the economic policy in Mexico, because there's clear evidence that there's something very wrong. The point is that doing "economic reforms" without touching the priviliges of the great economic powers and monopolies that plague the country in almost every market, without doing political reforms that bring accountability, without creating institutions that bring TRUE political reform and democracy, and without changing MICROeconomic policy is just playing fool. Mexico has being playing fool for the last 30 years, it's time for someone to tell the emperor that he is naked...

Mexico is already a much richer country in terms of PPP GDP/ capita, and also by any social metric (e.g. life expectancy, educational attainment, access to higher education, inequality, etc).
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That's evidence enough of Mexico's superior institutions & policy (though Mexico clearly has desperate problems of its own).
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On the other hand, since Brazil has 75% more people, and since Mexico also lacks the exchange rate boost from abundant commodity exports, it's unrealistic to suppose Mexico surpassing Brazil any time soon (for sure, it might happen in 80 years as a consequence of fertility rate differences - but that's irrelevant today).
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Brazil should now be looking at why standards of living are so much higher in Mexico (and in other developed countries), and attempt to adopt the best practice policies and institutional reforms possible.
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For instance, since Argentina has been blocking Mercosur-EU free trade negotiations, Brazil should brake with Brazil and go hell for leather for free trade with the EU and US (that, after all, is Mexican policy - and it's done wonders for the Mexican consumers & workers).
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The EU isn't even *so* important for Mexico (given close integration with the US), but liberal trade is taken seriously:http://ec.europa.eu/trade/creating-opportunities/bilateral-relations/cou...
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Brazil, on the other hand, which is far more dependent on trade with Europe, has among the worst trade regimes imaginable (in the same league as India):http://ec.europa.eu/trade/creating-opportunities/bilateral-relations/cou...

My friend, what matters are the trends. Mexico's trend in GDP per capita is awful. And you're wrong, Brazil's GDP per capita is almost at the same level as Mexico (I think it's a bit higher).

Mexico has a name around the world because of the great number of "liberal reforms" that were made here, however the outcome of these reforms has been really poor. The easiest way to see this is to look at the change in the GDP per capita since 1980, Mexico's geowth in the GDP per capita has worse than any other region of the world except for Sub-saharian Africa. Yep, that's right, we only perform better than countries that are in eternal civil war (by the way, they have performed better than us during the last decade!).

The truth is that what reigns in Mexico is not capitalism, it's crony capitalism, whih is worse than state economy in my iopinion, all these reforms have only helped to instaurate that since we have horrible institutions (yeah you're wrong on that too), so when you perform liberal reforms in a banana republic you run a great risk to end like that (oh look at our friends the russians, which had a very similar story than Mexico, just that we know how to diguise things better!).

Mexico is indeed an example, but an example of what happens when a ountry is plagued with crony capitalism. The US shall pay attention to our situtation, they are turning perilously similar to Mexico in many aspects. Team republican is working really hard to turn the US into a banana republic, the sad part of the story is that they can see an example of what will happen to them when Team republican acomplish it's work just at the south of the border.

Brazilian nominal GDP per capita is about 26% above the Mexican value - but that is due to a wild currency appreciation in the past 5 years (taking the extreme example, in 2002, Mexican nominal GDP/ capita was 140% higher than Brazil's). Brazil trades only a tiny proportion of its GDP, does relatively little trade with the world, and still imposes capital controls. All of these factors combine with the recent commodity boom to produce rapid (almost unchecked) exchange rate appreciation... but will also produce a massive collapse in the exchange rate and nominal dollar GDP when the commodity boom bursts.

Taking the average exchange rate over the past 6 years, Mexico's nominal GDP/ capita is comfortably above Brazil's. And taking PPP GDP/ capita, Mexico is 31% ahead of Brazil. Over the long run, as bubbles burst and exchange rates swing, that's what counts.

What was said above is not intended as praise for Mexico. When I said that Mexico has desperate problems of its own, I meant it. In particular, Mexico must:
- invest radically more in education at every level
- make progress towards gender equality and freedom of women in the workplace
- legalise the trade and consumption of all drugs, in order to undermine the nefarious influence of the cartels (play tough, there's a strong lobby for this in the US too)
- clean up the courts completely. Most court cases should go online.
- clean up public spending (online publication of all accounts, open online tender for all procurement, open all decisions to online appeal, etc).
And much more besides...

But on trade policy, Mexico has it right. And on trade policy, the Brazilian government is thoroughly screwing its people. Economic development and productivity matter - and liberal trade, though not sufficient, is essential for any country which wishes to develop.

Brazil's trade policy imposes an awful constraint on diversification of the economy, and is one of the greatest single threats to the elimination of poverty or lifting of educational or living standards in Brazil. Prosperity matters.

Dude, Mexico was ALWAYS richer than Brazil on a per capita basis. Yes, I really mean "always", since the Pre-Columbian times to the 19th century to our days. Mexico was much richer than Brazil during the whole 19th century and until the first decades of the 20th century, when Brazil was mostly an underperformer which was poorer than all the rest of South America except Bolivia. Brazil started to catch up in the 1930's, and from the 1930's to the early 1980's Brazil got nearer to Mexico on a GDP per capita basis, but it remained poorer, because Mexico was much richer indeed before. Then since the 1980's Brazil grew more during some years and Mexico grew more during some other years, but the end result is that Mexico is now only a little richer than Brazil. With these things you need to have the notion of context. Countries didn't start suddenly in 2000, they have a long history going back, and as Puigi already reinforced what matters (in terms of how to judge the policies of a government) are the trends. If a developed country starts to grow 0.5% after a new government, its people won't be glad that at least they are still richer than that a relatively poorer country which is growing 3-4% a year.

Indeed. And if you ask why Mexico has historically failed to converge with European, US, Canadian, Japanese, Korean, Australian or New Zealand living standards, the answers have to include:
- failure to support a big financial sector (indeed the government prohibited lending at interest for centuries, and repeatedly locked up financiers and appropriated wealth). Modern banking and stockmarkets are a prerequisite for development - as Southern Europe, Japan, South Korea and China demonstrate (all grew very rapidly after modern capital markets were first established).
- failure to maintain clean government & courts
- failure of the state to invest heavily in universal literacy, technical training and higher education
- failure to achieve gender equality and full workforce participation of women (more of the workforce - and especially a bigger proportion of the 10% most intelligent in the population - need to work to support prosperity)
- failure to maintain a stable currency and stable macroeconomic/ investment environment (which is essential for business investment and finance, with the rising productivity and wages this supports)
- extreme income inequality (poverty breeds poverty, deprives business of a large scale consumer market, and deprives the economy of a self-supporting skills base)
- failure to access large external markets with removal of trade barriers
- failure to attract large scale FDI inflows for infrastructure & business development (all developed countries achieved this on a large scale while they were growing fastest - and still do during bubble times)

All of the above urgently needs to be tackled if Mexico is to become rich. Yes, that absolutely must mean more redistribution of income and more public investment in education and infrastructure. But it also means government support for developing financial markets; an independent central bank with resolute pursuit of a simple inflation target whatever the ugliness of unemployment numbers or timing of the election; and determined progress towards fully engaging in global free trade.

(For Mexican businesses to compete with the best, they have to be able to access the world's best capital equipment, parts, feedstocks and supporting services.)

Puigi, liberal policies are OK. They are great. We should love them. They increase our competitiveness. The thing is that we are suffering an internal policy gridlock: Indeed, the only thing that Mexico is lacking is investment for internal markets, private and public, so that GDP can expand on the basis of close to 40 million people entering the real economy.

Big capital private investment won't thrive beacause of the violence and lack of labour reform. Small capital investment and entrepeneurship won't thrive because of the lack of Education Investment and lack of Fiscal and Labour Reforms. The government won't invest on Education or finish the job of reducing violence on a tight budget because of the lack of a Fiscal Reform and an Energy Reform that would increase revenue from Pemex.

I've been repeating this since the presidential campaign: All of the candidates got right some part of the story: the Left understood the need for investment, but didn't care to explain where the Capital would come from. The Right is eager as always to pass reforms, but apparently don't know what the heck they want from them.

But that's the way Crony Capitalism will go for good, GDP per capita will multiply and yes, Mexico's economy will grow at 7%+ and surpass Brazil's in a matter of a decade.

The US is already a banana republic and just doesn't know it yet. Or rather, a North American Balkans of banana republics. That process is well underway. And yes, its our crony capitalists at fault and their political henchman just as in Mexico. Good post, Puigi.

One factor overwhelmingly impacts whether Mexico can boom. And it is something over which the Mexican government has no control. (When) will the United States finally dump its failed drug wars, and adopt something more sensible.

Until that happens, the drug cartels and their crime empires will make it difficult to impossible for Mexico to thrive. Once it happens, Mexico has a chance. (And we see again the truth of the remark attributed to Diaz: "Poor Mexico, so far from God and so close to the United States!")

There are two spelling mistakes in this article. "Millenia" is a plural form; the year 2001 started a "millennium", the singular.

Also, the name of the 1995-2002 Brazilian president is spelled in a Spanish-like fashion, whereas we speak Portuguese here. Including his middle name, which for some reason is included in spoken and written language virtually always, the correct form would be Fernando Henrique Cardoso.